What Exactly Is A 'Good' Credit Score?

Last week Discover announced that it was making its free FICO Scorecard available to everybody. With free FICO score access, there really is no excuse to remain in the dark when it comes to your credit score. It does, however, raise an important question. What is a good credit score?

As a personal finance blogger, it’s a question I get a lot. To the surprise of some, there is no official definition of what constitutes a good credit score. Scores are often described as excellent, good, fair, and poor by those in the finance industry. Credit cards, for example, will often state that good to excellent credit is required to qualify for a top rewards card. But what exactly does that mean?

It turns out that what constitutes a ‘good’ score depends on the circumstances. A good score may be one thing when applying for a mortgage, and something very different when applying for a credit card or car loan. So with that in mind, here’s what you need to know to evaluate your credit score.

Home Loans

With home loans there are two key credit score requirements. The first is the minimum score necessary to qualify for a mortgage. The second is the minimum score needed to qualify for the lowest interest rates.

This April 22, 2005 file photo shows logos for MasterCard and Visa credit cards at the entrance of a New York coffee shop. . (AP Photo/Mark Lennihan, File)

The score required to qualify for a mortgage varies based on the type of loan. For a conventional mortgage, the general rule is that a FICO score of at least 620 is required. FHA loans have a lower minimum of 500 to 580 (580 qualifies you for a 3.5% down FHA loan; at 500 at 10% downpayment is required), but not all banks will approve even an FHA loan with a credit score south of 620.

There is one home loan that has no minimum credit score requirement. A VA Guaranteed Loan instead requires the lender to review the entire loan profile.

To qualify for the lowest rate, a FICO score of about 760 or better is required. According to myFICO, a credit score of 760 qualify for a 30-year fixed rate today of 3.3%. The interest rate jumps to 4.89% with a FICO score of 620.

Credit Cards

Unlike mortgages, credit card issuers don’t disclose their underwriting standards. There is no publicly available credit score data released by the credit card companies based on application approvals. There are, however, some data sources that give us some general guidelines.

Keep in mind that some rewards credit cards require good, not excellent, credit. For example, the
Chase Freedom Unlimited Card requires good credit (660 to 719) according to myFICO. It’s a card I’ve carried for years and have reviewed on my site.

Car Loans

Car loans are the wild west when it comes to credit scores. There are no set standards, and credit score requirements can vary from one lender to the next. According to CarFax, a score of 720 should be sufficient to qualify for the lowest rates available. That’s significantly lower than the 760 required to score the lowest rate on a mortgage. Sub-prime car loans can be had with scores in the 500 to 600 range.

School Loans

School loans present an interesting twist for several reasons. Federally guaranteed school loans generally do not have a credit score requirement. The Stafford, Perkins and PLUS loans do not require a minimum credit score, according to FinAid. The PLUS loan does require that the borrower not have an adverse credit history, but no minimum score is required.

Private student loans are another story. Like most private loans, credit scores generally are taken into account. Yet this is changing. SoFi, a leader in online lending, no longer includes FICO scores in its underwriting process. According to a January 2016 press release, SoFi “ no longer factors FICO scores into its loan qualification process. Instead, the company considers three criteria — employment history, track record of meeting financial obligations and monthly cash flow minus expenses — to determine if an applicant is qualified for its loan products, which include student loan refinancing, mortgages and personal loans.”

In short, there is no one definition of what constitutes a good credit score. A good score can vary by industry, loan program, and over time.

I am an investor, lawyer, blogger, husband, father, and Buckeye fanatic. I graduated in 1992 from law school and have worked in private practice, in-house for a publicly traded company, and for a regulator in the securities industry.